National Association of Home Builders Discusses Economics and Housing Policy

New Home Sales Continue Improvement

September new home sales increased 5.7% to an annual rate of 389,000, the highest level since the home buyer tax credit expired in early 2010. The three-month moving average of new home sales has increased steadily for over a year as more housing markets begin to see rising home prices and improving consumer sentiment.
The months’ supply of new homes for sale fell to a seven year low of 4.5 months as the pace of sales picked up but the inventory advanced by only 2,000. The number of completed homes for sale ready for immediate move-in remains at a record low of 38,000 as builders remain cautious about building ahead of the market and as credit access remains tight.
Median home price increased 11.7% from September 2011. The price increase is primarily a result of larger, move-up homes being sold rather than an increase in home prices. Move-up buyers with equity and the ability to pass rigid credit checks are a larger share of the market and tend to buy more expensive homes. Some building material prices costs have increased in the past six months but home building remains very competitive with the existing home market so the price increases are more likely a sign of different homes sold than similar homes costing more.
There was a strong regional variation in home sales with the largest region, the South, advancing 16.8% while the second smallest, the Midwest, fell 37.3%. The Northeast and West advanced 16.7% and 3.9% respectively. Monthly regional data do fluctuate significantly and quarterly averages may be a better gauge of regional activity. On a quarterly basis, the Northeast was up 18.5%, the Midwest was down 8.2% returning to levels last seen in early 2012, the South was up 4.9% and the West was up 4% from the second quarter to the third quarter.